Old-school finance and the upstart world of crypto are coming closer together as President Donald Trump encourages more favorable regulation of digital assets while also participating financially in their rising popularity.
The latest example of this confluence came this past week when the president’s namesake Trump Media & Technology Group (DJT) announced plans to expand into financial services by launching a company called Truth.Fi.
Trump Media will allocate up to $250 million of Truth.Fi’s cash into cryptocurrencies and other investments. The company keeping custody of those funds will be one of America’s best-known financial giants: Charles Schwab (SCHW).
Some other big names on Wall Street may soon be looking to hold crypto assets for their clients as a result of a change put in place by Trump’s administration during his first week in office.
The Securities and Exchange Commission decided to eliminate a piece of accounting guidance known as Staff Accounting Bulletin 121 (SAB 121) that called for financial institutions to hold crypto on their balance sheet as a liability.
The old guidance made it too costly for most regulated banks to offer crypto custody. It also called for heightened public disclosures from non-bank financial firms such as Coinbase Global (COIN), a major cryptocurrency exchange.
"Bye, bye SAB 121! It's not been fun," SEC commissioner Hester Peirce said in an X post celebrating the change.
Kevin Fromer, CEO of bank advocacy group Financial Services Forum, called the SEC rule change "a step in the right direction."
The thinking within crypto circles is that this one step is part of a directional shift that will ultimately encourage more banking giants to deal with digital assets. Such a shift would bring wider acceptance of the industry.
Letting more US financial institutions hold digital assets will lead to "a greater level of integration of crypto in mainstream financial channels," said Jeffrey Neuburger, head of the blockchain group at law firm Proskauer.
What's more, "crypto is likely to become a more common investment asset like securities, gold, or other precious metals," Neuburger added.
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Banks are still waiting for new guidance on crypto assets from the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
The current regulatory guidance from those agencies — released weeks after a 2022 crypto meltdown that followed the collapse of cryptocurrency exchange FTX — cautions banks about the risk of engaging in crypto activities or even providing the industry with banking services.
The Trump administration has yet to nominate new heads for the FDIC and OCC, and the Federal Reserve must also name a new top banking regulator following Michael Barr’s decision to step down as vice chair for supervision by the end of February.
Fed Chair Jerome Powell, when asked this past week about cryptocurrencies, said, "We're not against innovation and we certainly don't want to take actions that would cause banks to terminate customers who are perfectly legal."
But he also cautioned that "if you're making a choice to conduct that activity inside a bank, which is inside the federal safety net with deposit insurance, then you want to be pretty sure that that is a safe and sound activity."
Trump has made it clear that he wants his administration to support the expansion of the crypto industry. One of the first moves was to assemble a digital assets working group within the executive branch led by artificial intelligence and crypto czar David Sacks.
Its goal is to “support the responsible growth and use of digital assets, blockchain technology, and related technologies across all sectors of the economy.”
The SEC also formed a "crypto task force" to help the US regulator "draw clear regulatory lines, provide realistic paths to registration, craft sensible disclosure frameworks, and deploy enforcement resources judiciously.”
The president is also participating in the cryptocurrency industry. Just before his inauguration, Trump’s team launched an official meme coin for the 47th president (TRUMP) along with one for first lady Melania Trump (MELANIA) on the Solana (SOL) blockchain.
There is a lot more US banks might be able to do with crypto, so long as their Washington overseers allow it.
Those options could range from offering customers crypto or related exchange-traded funds to issuing stablecoins for payments, trading crypto for clients, and even managing deposits on blockchain platforms.
"I'm not sure that every bank out there has been dying to hold crypto assets," Ian Katz, a financial regulation analyst for Capital Alpha Partners, told chof360 Finance. But lenders "would rather trust their own risk management and their own decision making then have it be decided by regulators."
Bosses of the some of the biggest banks are certainly giving the topic more consideration.
"For us, the equation is really around whether we, as a highly regulated financial institution, can act as transactors," Morgan Stanley (MS) CEO Ted Pick told CNBC during the World Economic Forum in Davos, Switzerland.
"We'll be working with Treasury and the other regulators to figure out how we can offer that in a safe way," Pick added.
Bank of America (BAC) CEO Brian Moynihan told CNBC at that same event that “if the rules come in and make it a real thing that you can actually do business with, you’ll find that the banking system will come in hard on the transactional side of it.”
Phil Green, chief executive of Cullen/Frost Bankers (CFR), told chof360 Finance that “it makes sense to me that the banking industry would have a role in custody. I think that makes sense for us to consider. But it's really more about what the clients want."
"If President Trump is advocating for it, and you're seeing more stuff happen, no doubt, it will be more top of mind with people so I expect that we're going to have to up our game," Green added.
David Hollerith is a senior reporter for chof360 Finance covering banking, crypto, and other areas in finance.
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